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deposit amount

Hi,

I have just come off the phone to my mortgage provider, and am a bit confused, mainly on account that the advisor was a newbie and wasn't too sure himself! Someone's going to call me back, but in the meantime, I'm hoping someone here can clarify something for me.

Basically, I (jointly) own a property, and am in the middle of a fixed rate mortgage, which is transportable. The kind of properties we have been looking at are about £40,000 more than our present one.

The advisor told me that for the excess price, we will need to arrange an additional product with them, to cover this excess. I understand this bit.

However, he also said that we need to come up with a 15% deposit of the total of the new property. That is probably more than we can afford, and I'm confused by the logic of this. We left a decent deposit when we bought our present property, so I asked if that could be taken into consideration, and he didn't know. I would have thought that it would have been more logical if we only paid 15% on the £40,000 excess, i.e. the new product.

I'd be very grateful if someone here could clarify this for me please. Thanks in advance.

Comments

  • Caz3121
    Caz3121 Posts: 15,841 Forumite
    Part of the Furniture 10,000 Posts Name Dropper
    I read this as the maximum LTV is 85% so if the new property is £200k then the maximum mortgage you can have (old ported one plus new borrowing) is £170k
    do you have equity in your current property that will be released when you sell?
  • luckyfool
    luckyfool Posts: 1,683 Forumite
    I'm afraid he is likely to be correct. The portability is subject to the lenders criteria at the time you move, so if they are only lending 85% on new properties then that would apply to you too potentially.
  • Your deposit comes from the equity in your current property.

    They will take your current mortgage and add £40,000 to it even though it might be on a different deal in terms of rate and so on.
    You'll need 15% of the value of the new property to be non-mortgage money. This should be equity in your current house or additional savings funds if you're short.
  • neilsolaris
    neilsolaris Posts: 180 Forumite
    Hi Caz3121 and thanks for your help. I'll give you the figures to put it into context.

    From the 1st of April this year, we had 85,000 remaining on our mortgage. The value of our property is around 125,000, so we have about £40,000 equity.

    The mortgage advisor told me we'd need to lay down 15% of the total price of any new property. The new property is we might buy is about £160,000, so he was suggesting we'd need to put down a £24,000 deposit when we move. Is this normally how it's done?
  • luckyfool
    luckyfool Posts: 1,683 Forumite
    neilsolaris - They want at least £24,000 going into the new property, i.e. they will lend up to £136,000. Given that you think you have £40,000 equity in your current property I don't see where the problem would be in doing this?
  • neilsolaris
    neilsolaris Posts: 180 Forumite
    Thanks itmightbeusefuloneday. I posted my last comment before I'd read yours.

    Therefore, am I right in saying, I could use £35,000 of the equity on my present property to go towards the new one (assuming I sell my place for £125,000)?
  • Thrugelmir
    Thrugelmir Posts: 89,546 Forumite
    Part of the Furniture 10,000 Posts Name Dropper Photogenic
    Hi Caz3121 and thanks for your help. I'll give you the figures to put it into context.

    From the 1st of April this year, we had 85,000 remaining on our mortgage. The value of our property is around 125,000, so we have about £40,000 equity.

    The mortgage advisor told me we'd need to lay down 15% of the total price of any new property. The new property is we might buy is about £160,000, so he was suggesting we'd need to put down a £24,000 deposit when we move. Is this normally how it's done?

    The 15% deposit will come from your existing equity. The maximum that your lender will advance you is £146,000 providing you meet the criteria. Though as you have £40k equity in your existing property you should'nt need to borrow this amount, which may well enable you to borrow at a lower rate of interest.
  • neilsolaris
    neilsolaris Posts: 180 Forumite
    Thanks guys, you've clarified it for me now, and put my mind at rest! I suppose I was just unlucky getting an advisor who hadn't yet finished his training. I'm surprised they allowed him to offer advice though!
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